RA Treasurer Warns Assessments May Rise Over $700 in 2017

There is a good chance that Reston Association assessments could top $700 annually in 2017.

RA Treasurer Dannielle LaRosa presented some of the financial realities to board members at their regular meeting Thursday. The board spends September and October looking at next year’s budget needs before setting next year’s assessment in November.

LaRosa reminded board members that RA members paid $657 in 2016, however, that amount was offset by a $1 million surplus moved over from operating fund reserves. RA members have been getting a service level as if they paid $705 in 2016, she said.

LaRosa warned last fall that the $1 million would not be available in 2017, so the board needed to be prepared to possibly set a large jump in the 2017 assessment amount.

“Our members are used to paying $657,” she said. “I personally wouldn’t feel right having a $712 starting point [for 2017 assessments].”

LaRosa also said assessments rose at a $25-a-year rate from 2008 to 2014, which added to both the cash surplus as well as a marked increase in the Reserve, Repair and Replacement Fund.

From 2011 to 2013, the RRRF was about $4 million, she showed the directors in a graph. That was an amount recommended by a reserve study that looked at RA’s needs for an aging infrastructure.

There is now $6 million in there — heading for $7 million in 2017. At the same time, RA has been spending a little more than $2 million annually on those RRRF projects.

“In the big picture, we have a line going straight up where we should be spending, said LaRosa. “The organization needs to put someone in charge of capital who can manage and execute. These projects are not getting done.”

RA CEO Cate Fulkerson agrees.

“It is unacceptable to me that there are carry forwards year after year,” she said. “It is nice to see [reserves] growing, but we are not getting stuff done.”

Assessments have also grown since 2014 (when they were $634) because of operating costs, LaRosa said. RA is now spending $2.6 million more annually than it did five years ago, she said.

Among the big ticket items: The move to RA’s new headquarters in 2010 is now costing the association $500,000 a year more in rent; and a rise of $1.5 million in salaries (including 3-percent merit raises, a rise in the cost of benefits and the addition of 12 new staff members).

Fulkerson explained some of the expenses. She said staying at the old space on Isaac Newton Square was not possible because the building owner was not going to upgrade to high-speed fiber optics and the organization had outgrown the space.

She also said implementation of the Affordable Care Act two years ago cost RA money, as did IT upgrades and necessary hires, such as in covenants administration.

“We have more 21,000 homes that need to be inspected,” she said. “We need staff to do that.”

At-Large Director Ray Wedell said RA needs to take a step back and assess the situation. With $7 million in reserves, everyone with a pet project can and will want money, he said.

He also said RA needs to take a hard look at its spending at what it is asking for from its members.

“Social Security is not giving a 3-percent raise,” he said. “Private companies are cutting back. This is common sense. I cannot sell a $705 assessment to members and I am not going to try. We cannot keep doing this.

“We have to figure out a way to make this organization the proper size,” he said. “If we need three new people, fine. But what about attrition? Do we really need eight people in a department when six would be fine?”

The board will continue budget talks and have a draft budget the first week in October.

In other RA news, the board voted to hire Mediaworld Ventures to conduct an independent review of the process used by RA to purchase and renovate The Lake House (formerly the Tetra property) last year.

I don’t understand why RA moved its headquarters to a place with such high rent instead of finding a place with low rent or buying a small property for itself and paying it off rather than paying rent.

Chuck Morningwood

Because they wanted a better vantage point from which to watch the Hunger Games over in Southgate.

“May the odds be ever in your favor.”

MSinVA

So true…

BOHICA

Don’t you know that they are special!! They forget that they are a “homeowners association” & not a city, town or county which they compare themselves to in order to justify outrageous employee benefits. They make special deals with builders/developers for reduced rates & then stick it to the homeowners. So sick of their arrogance.

Scott H

‘High speed internet’ is what Cate Fulkerson says was the first reason.

Arielle in NoVA

That’s why they moved from the Isaac Newton Square location. They could have gotten high speed internet in many places, not just this expensive rental.

Chuck Morningwood

One word: BOHICA.

Adrian Havill

How much would it be if Tetra had never existed?

JohnIZ

What am I not understanding here? RA is collecting more money (for the reserve fund) than they can spend, but still wants to raise assessments? And they can also absorb a $400k Tetra overrun like it is no big deal.

Nate_VA

The cost benefit analysis is on the verge of tipping away from Reston being worth a $700 premium.

Rational Reston

On the verge? I say it’s starting to eat itself.

Why do you bother?

You mean the absurd gridlock, price-gouging retail moguls and proposed tax to eat at Mickey D’s don’t make you feel special?

cRAzy

Hmmmm! Reston 2020 puts the net cost of the Lake House this year at $882,152. Divide that by the roughly 21,000 households in RA and that’s $42 per household.

So that’s where virtually all the likely assessment fee will go. Such a deal!

Selling the lake house could exacerbate the problem. It is unlikely the RA will be able to sell the property for as much as they paid for it. The sale would trigger a huge bill that the RA would be unable to pay.

Scott H

Revenue estimates are as pie in the sky as the appraisal was. Is there any doubt that theblale house will be subsidized by annual assessments? Everything spent thus far is a sunk cost. Sell it and move on.

JoeInReston

Won’t the RA have to present a check to the mortgage company to make up the difference between what they paid and what the new buyer paid? Where are they going to get this money?

Scott H

Of course, but where are they going to get the money each year to make up the shortfall?
It’s called a stupid tax, and RA is stupid. You can make a one-time payment and get rid of the debt or keep throwing good money after bad year after year, b/c we supposedly have this great new amenity.
RA needs to cut costs, which means divesting certain things. There is no need for a printed magazine for an HOA in 2016. There is no need to own poorly valued real estate.

JoeInReston

Given the amount of money they paid over its tax assessment (and yes, the tax assessed values isn’t necessarily the market value) and the easements on the property that make it a difficult property to use commercially, they are unlikely going to find a bigger sucker that will pay anywhere near what the RA paid. What if the difference is half million or million dollars?

Spreading the debt over 30 years significantly shrinks the amount of money owed in any one year. Hopefully over time, inflation can dull the effect.

Scott H

There you go. Now you’re thinking like a politician. Just don’t complain about the $700 assessment or when it’s $1000 in a few years.

JoeInReston

I don’t believe there is a choice here. I don’t think residents will ever approve of a one time $100 fee on top of $700 annual assessment.

I think its premature to say “sell it” without an examination of the annual revenues the property will bring in in relation to its mortgage payment versus how much the property can be sold for and the resulting one time fee that the residents will have to pony up.

Just not enough information…

Scott H

Like i said – like a politician. Avoid the hard choice and instead opt for the slow bleed until it’s too late to do anything about it.
Also, vote #Hillary2016 and let’s put this country on a path to $30Trillion in debt and “hope for inflation.”

Guest

I’m with you on RA’s future, but your grasp of Clinton’s economic policy plan appears to be uncertain at best.

If acting like a politician consists of waiting until you have a better understanding of the numbers before making a big decision such as selling off the Lake House property, than I’m acting like a politician.

cRAzy

We didn’t have an understanding of the costs of Tetra before RA decided to buy the shithole at double its market value, why do we need an understanding before we make “a big decision” to sell the piece of crap???

JoeInReston

How well did the decision to buy Tetra without an understanding of the costs work out?

Done deal

Joe, I think the public would be well served to pay a penalty on behalf of the arrogant leadership, say 100$ each household and payoff the debt.

This would.be a one time payment for each of us with an added clause in the HOA contract that would prevent this situation from reoccuring.

At this time it would be also appropriate for all black sheep to leave the family.

Overrunhell

Cutting costs won’t cut it. I’ve seen this before, with other organizations. Cutting does not bring prosperity, additional sources of revenue does. Until this and future boards realize this, RA will die from a thousand cuts.

Scott H

What the hell are you talking about? RA is not a company. It’s an HOA funded by member dues.
Companies need to invest money to make money. A forced membership HOA has a built-in, guaranteed revenue base. They provide very specific services for the benefit of the members. What they provide and subsequently, how much each individual is charged, is up to the membership to determine.

Furthermore, we are looking at a substantial number of new RA members via all the new construction. This new source of revenue will come with little in the way of incremental expenses. There should be serious discussion of assessment reductions or holding them steady for the mid-term and investing in the maintenance of capital assets.

Overrunhell

I agree with your third paragraph.

Scott H

FTR, there is absolutely nothing in the first 2 paragraphs that you can dispute. You have a right to your opinion, but you don’t have a right to your own facts.

Overrunhell

Actually, it’s an interpretation of your lack of knowledge of how not-for-profits operate.

Scott H

But you have not disputed one thing I said? Please enlighten me on how RA needs to “invest” in order to increase revenues, which is perhaps 95% from member dues and fees.

Overrunhell

You missed my point. RA cannot continue to rely on 95% of its revenue source coming from member dues alone. RA needs to identify and follow-through on diversifying its revenue streams – now.

RA is no different from any other organization facing a similar revenue model crisis — state, local, federal, for-profit, not-for-profit, non-profit. Smart legislatures, councils and boards are working on strategic revenue models that look at alternative sources. You can only cut so much — to go further will destroy the enterprise.

Finance 101 teaches us this. RA has the opportunity to be innovative, by leveraging its status, its relationships, its demographics to foster and bring in additional revenue.

Scott H

You miss THE point entirely.
RA is an HOA. It doesn’t need to provide any specific set of services to be competitive or survive. It is an administrative organization that exists purely for the benefit of the membership.
There is no revenue crisis. There is an expense crisis.
Or to put it another way. The people of Reston will get the assessment they vote for. They can have a $700-1000 assessment and get a certain set of services they may or many not use or they can vote/demand that a smaller set of services they may or may not use be provided. But make no mistake – there is no revenue crisis. If anything, there is only a common sense (or maybe ethics) crisis that led to the Lake House purchase.

Overrunhell

Again, I’ll respectfully disagree. RA is facing a revenue crisis. Continuing to solely focus on the expenses line – is a kiss of death. The future of this community depends on innovative new ideas, nut cuts.

Scott H

Just.Do.Less

Problem.Solved

BOHICA

The new members will be renters! RA offered the developers very low dues plus no oversite or demands.

Dangerous precedent

No public institution should have as their mission statement an objective to generate income. If that is so might as well take the reserve funds and dump them into too big to fail wall street.

I think the powers that be should excuse themselves from public trust and let the real servants step fwd and do the job. A high school grad could do better than this.

Overrunhell

Uhh, Reston is not a public Institution. It is a nonstock corporation. It has every right to seek revenue sources.

Dodge

Wait, we still have a magazine??

Mike M

Democrats can never have enough of your money.

Greg

Told ya!

Nyla J.

I don’t use $700 worth of anything from RA.
I’m in if we all decide not to pay next year.

JoeInReston

The Tetra issues are abstract. $700 assessments are more concrete. Residents might get angry enough to vote the bums out.

I predict they will try to institute a ‘progressive’ assessment program to pawn the additional debt onto a smaller number of people. Limit the number of voters made angry at the assessments. Change the debate terms from poor management to assessment ‘fairness’.

Overrunhell

Ray Wedell’s naive idea of instituting a progressive tax is just plain stupid. I hope others on the board recognize this, and just shut down the conversation.

cRAzy

“The Tetra issues are abstract.”
RA is spending more than one million dollars this year on Tetra–out of pocket expenses we all pay. What’s abstract about that?
RA bought Tetra for twice its assessed value. That’s $2.65MM for a $1.3MM property–the property with the current building on it, not a hypothetical restaurant that would be twice as large as the current structure and that law would prevent from ever being constructed. Is that too abstract?

JoeInReston

The point I was trying to make was that the sins of Tetra don’t come home to roost until the residents are asked to pay higher assessments.

Scott H

Now now. You can’t expect a non-profit HOA to reside in class B office space!

That said, I’m not in favor of buying a property. Ownership is risk and over time, RA will have varying office space needs. They just need to act like a non-profit and be fiscal stewards of the membership’s money.

TimeToReDoRA

Ms. LaRoss has tried to sound the alarm a couple of times now, but Cate Fulkerson and this Board majority have plunged on with the unnecessary Tetra purchase and lavish redo and their redefinition of the Association. RA has taken on several questionable new functions, pours money into the coffers of useless lawyers (now running $750,000+ per year), and has created a super grade corps of 5 earning $100-200,000 each. Front office, controller, and HR have grown out of proportion.
RA is no longer recognizable as what it was intended to be and should be–our home owners association. It is time for a downsizing and re-shaping.

Overrunhell

I’ve lived in Reston for over thirty years. They have kept their full time staff at around 80 people since I can remember. Downsizing and cutting just won’t get any more blood out of the turnip. Cutting will significantly impair the ability to support over 21,000 (and growing) households. We’re already seeing it.

The biggest problem this board has: many board members do not understand basic Finance 101, Mr. Wendell is a prime example. The second biggest problem, because most don’t understand Finance: the board says cut. This is absolutely nonsensical.

This board and future boards, need to get into the mindset of diversifying their revenue.

They better set in place a strategy sooner than later, that identifies other sources of funds, such as grants, fundraising, corporate donations, commercial activities (i.e. Public Private Partnerships), expandingmembership, acquiring more land that can fall under the governing documents, etc. The list is endless.

Reston already has a 501(c)(3), The Friends of Reston, to make a lot of these efforts viable.

Greg

Firing Cate Fulkerson will immediately cut a quarter million dollars from the wasteful expenses.

Overrunhell

It’s not the CEO, it’s this board. And future boards that behave the same way.

Greg

The board is not not paid; the staff is.

Overrunhell

We will have to respectfully disagree. This board and future boards need good people, capable of governing, and making good decisions. Governance is key.

Rational Reston

Can’t you compromise and kick Cate Fulkerson AND the Board to the curb?

Overrunhell

First, replacing a CEO is a costly endeavor. Second, I blame the majority of RA’s recent fascos on the board and the special interest group(s) that control it.

Rational Reston

You can actually directly trace this back to the Governance Referendum fiasco where they eliminated the cap with no guidelines and RA played fast and loose with the voting rules. Next time we should have UN Election Observers or Jimmy Carter on hand to make sure there are no shenanigans.

Overrunhell

The intent was there. It’s implementation, less so. Community activists (idiots in my opinion) got in the middle of the process, squeezing out general members, and influencing key board members who owed them their election.

Future board members should not be influenced by, or owe their allegiance to any group during the election process. Not at this level.

Greg

What you may be missing is that the board has a very strong and unbreachable fiduciary duty the association. If any of the board members acted improperly they can be sued individually and as a group for breach of that duty, waste, fraud, conspiracy and any number of other tortious acts.

The staff are generally not held to that same standard, but they may be conspirators and could be sued as well.

What’s most interesting is that the VA POA provides for class action status and recovery of all costs of litigation in these sorts of situations.

There is at least one condo complex in Reston in which the association is suing one of its board members.

Greg

Also, and to increase fiscal participation, with another Fortune 500 company soon moving to Reston, it’s high time these freeloading companies (who pay no RA assessment but could deduct all of what they do pay as business expenses if they did) start sponsoring, paying and doing more.

Bob

In view of this budget situation, is anyone reexamining any special RA deals that may have been made with (or may be in the works for) Metro-related high-rise developments?